Sunday, March 15, 2009

Did I read that right? The federal government out and out gave American International Group $170 billion to keep from folding, and the company now plans to give $160 million in bonuses? I understand the need to stimulate the economy, but tossing lard-drenched oats to the swine makes no sense. Don't we ever make the pigs squeal for their supper?

The news was above the fold in today's New York Times. My wife and I read the paper together on Sunday mornings before we each head off to work. Reading today's paper made we wonder why we were rushing off to work on a sunny Sunday morning. Ought we, too, to simply mail it in and expect a federal check?

Edward M. Libby, the head porker at AIG justified the bonuses on contractual grounds. The company made commitments after all.

Listen to Libby: "We cannot attract the best and the brightest talent to lead and staff the A.I.G. businesses -- which are now being operated principally on behalf of American taxpayers -- if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury." I am beginning to rethink whether balcony diving ought after all to be the fate of those who cannot face their failures.

It is not enough that the investing class snookered us into behaving as though we believed we really could get something for nothing. Almost all of us bought into the real estate game. Living beyond our means became a national pastime. And the likes of Libby were giddy serving our need for ready credit.

But that swindle was nothing as compared to the simpering that yielded a federal bailout of bankers who behaved like drunken nabobs managing monopoly money. We kept AIG and others from sinking to save ourselves, we said. We're pouring billions into a bailout to beat all bailouts. And there is no end in sight. We need ready credit, we're told, to keep hope alive.

Whose hope? The slimyshucksters who bobbed for our dollars by promising golden apples at the bottom of every barrel? Why are any of the "best and brightest" who waltzed we trusting suckers to the brink of disaster still working? Bonuses for this crowd? They're lucky they don't get bullets instead.

Someone ought to make Joseph Schumpeter'sCapitalism, Socialism and Democracy, published in 1942, required reading for Libby and his pals. Schumpeter believed that markets were self-correcting. Dead weight, old and tired industries, and, I suspect, financiers who can't stop dreaming of easy money were sometimes pushed aside in a process known as "creative destruction." Sure, it hurts. But pain is a companion to growth; ask any teenager.

We're insulating the likes of Libby from the consequences of their failure. They came to us and asked for easy cash. We gave it to them. When they mismanaged that, they then cried poor to Uncle Same. Obligingly, he's now anteing up. But the fact remains that the money being spent today is our children's, and their children's. We're paying a fool's mortgage.

It may well be that a Keynesian response to an economic slowdown is appropriate. I am no economist. But when Libby and company comes simpering to the door saying that they need to honor contracts requiring bonuses, we are well within our bounds to question whether there is any reason in the world we ought not let these glad-handing hucksters slide straight into bankruptcy. They can join the millions of Americans who have lost homes, fortune and future to a climate of greed whipped up the lippy Mr. Libby and friends.